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NEWS ReleaseInternational Wex Reports Financial Results for First Quarter EndedJune 30, 2004Company Reports Clinical Trial Progress and Increase in Working Capital Date: August 17, 2004 Toronto Stock Exchange
Trading Symbol: WXI Vancouver, August 17, 2004 - International Wex Technologies Inc. (TSX: WXI) today reported interim financial results for the first quarter of fiscal 2005 (three months ended June 30, 2004 ). The comparative period for these statements is the first fiscal quarter of 2004 (three months ended June 30, 2003 ). All amounts are in Canadian dollars unless otherwise specified.
Results of Operations
For the first quarter of fiscal 2005 WEX recorded a net loss of $4,270,028 ($0.13 per common share) compared to a loss of $932,713 ($0.04 per common share) in the comparative quarter ended June 30, 2004 . The increase in loss is attributable to increased research and development expenditures and higher stock-based compensation as a result of adopting the fair value method of accounting for employee options. All results of operations were in line with management expectations. Revenue Revenue from product sales and license fees increased to $215,334 for the first quarter of 2005 versus $152,633 for the comparable period a year ago. Sales of generic pharmaceuticals increased to $136,199 from $73,498. The increase in generic sales reflects the continued recovery of the Company's business which was affected in 2003 by the closure of hospitals and clinics in China during the SARS crisis. Gross margins on product sales also improved in the first quarter of fiscal 2005, rising to 38% from 15% in the corresponding quarter a year ago. The Company recorded licensing income of $79,135 for the three months ended June 30, 2004 and $79,135 for the comparable quarter in 2003. The income for both periods is related to a licensing agreement signed with Laboratorios del Dr. Esteve S.A. in fiscal 2003. The Company received an upfront net licensing payment of $1,582,700 which has been recorded as deferred revenue and is being amortized over a 5 year period. Expenditures For the first quarter of fiscal 2005, research and development expenditures increased to support the continued development of the company's lead product Tectin™. Tectin™ is being tested in a pivotal double-blind placebo-controlled study in patients with refractory cancer pain. Included in research and development expenses for the first quarter of 2005 is a non-cash stock-based compensation expense of $1,118,887 as compared to $nil for the same period in 2003. General and administrative expenses for first quarter of 2005 were lower compared to the same period a year ago excluding the impact of non-cash stock-based compensation expenses. Non-cash stock-based compensation expenses were $1,354,975 compared to $nil for the comparative quarter ending June 30, 2003 . Going forward, a moderate increase in general and administrative expenses is expected in support of the Company's expanded research, product development and business development operations and activities. Amortization expenses of $196,005 were recorded for the first quarter of 2005 as compared to $105,072 for the prior period, in line with expectations.
Investment and Other Income Interest and Sundry income in the first quarter of 2005 increased to $63,285 compared to $12,176 for the same period one year ago. The increase is primarily as a result of higher cash balances from financing activities compared to the same period in the prior year. A foreign exchange loss of $322,488 was recorded during the first quarter of 2005 as compared to a foreign exchange loss of $53,448 for same period in the prior year. Foreign exchange gains and losses result from the translation of Hong Kong dollar-denominated balances and transactions. The Company expects continued fluctuation in the Canadian dollar, the Hong Kong dollar and the Chinese RMB exchange rates during the 2005 fiscal year. Liquidity and Capital Resources
At June 30, 2004 , WEX had cash and cash equivalents and short-term investments of approximately $24,100,000 as compared to $18,300,000 at March 31, 2004 . In June 2004, the Company's wholly owned subsidiary, Wex Medical Limited, issued convertible debentures in the aggregate principal amount of U.S. $5.1 million. The debentures have a term of five years and carry an annual coupon of 5.5% payable semi-annually. Cash used in operations was $1,679,297 during the first quarter of 2005 compared to cash used in operations of $906,776 in the prior period one year ago. The current period increase in cash used reflects increased expenditures in research and development. Cash used in investing activities increased to $456,002 from $183,675 in the first quarter of 2004. The increase relates to an increased property and equipment and patent expenditures. Net cash provided by financing activities was $8,393,607 in the first quarter of 2005 compared to net cash of $35,209 used in the same prior period. The increase represents the convertible debenture discussed above and net proceeds of $1,675,124 from the issuance of share capital. About Tectin™ Tectin™ is a drug designed to treat moderate to severe pain, primarily through selective sodium channel blockade. Tectin™ is being tested in a pivotal double-blind placebo-controlled study in patients with refractory cancer pain. Interim results from the Phase IIa clinical trial suggest that Tectin™ may have unique properties capable of combining rapid and lasting analgesic effects without the morphine-like side effects characteristic of many approved drugs for the management of moderate to severe pain.
About International Wex Technologies Inc. International Wex Technologies Inc. is a pharmaceutical company dedicated to the discovery of new therapeutic agents for the treatment of moderate to severe pain, symptom relief associated with addiction withdrawal from opioid abuse, and medicines designed for local and regional anesthesia. The Company's principle business strategy is to derive drugs from naturally occurring toxins and develop proprietary products for North American, European and international markets. The Company also generates revenues from sales of generic products manufactured at its facility in China .
Forward Looking Statement Disclaimer Statements in this news release are forward-looking statements which may not be based on historical fact, including without limitation statements containing the words "believe", "may", "plan", "will", "estimate", "anticipates", "intends", "expects" and similar expressions. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, events or developments to be materially different from any future results, events or developments expressed or implied by such forward-looking statements. Such factors include, among others, WEX's stage of development, product revenues which are difficult to predict, foreign currency exchange risk, additional capital requirements, risks associated with the completion of clinical trials, the ability to protect its intellectual property and dependence on collaborative partners. These factors should be considered carefully and readers are cautioned not to place undue reliance on such forward-looking statements. The company disclaims any obligation to update any such factors or to publicly announce the result of any revisions to any of the forward-looking statements contained herein to reflect future results, events or developments. For additional information on our products call Don Evans or Gor don Stanley , Corporate Communications at 604-683-8880 or 1-800-722-7549 or visit us at http://www.wextech.ca.
Per: Donna Shum, Corporate Secretary The Toronto Stock Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of the content of this News Release.
Selected Financial Highlights for International Wex Technologies Inc. (Unaudited)
CONSOLIDATED BALANCE SHEETS (Expressed in Canadian Dollars) June 30, March 31, 2004 2004 $ $___ UNDAUDITED
ASSETS Current Cash and cash equivalents 14,121,139 8,301,863 Restricted cash - 209,336 Short-term investments 10,023,000 10,023,000 Current portion of recoverable deposit [note 2] 125,000 - Accounts and other receivables 260,986 199,083 Investment tax credit receivable 100,000 100,000 Inventories 50,637 38,748 Prepaid expenses and deposits 929,971 884,906 Total current assets 25,610,733 19,756,936 Long term portion of rental deposits [note 2] 125,000 - Property and equipment [note 3] 1,880,773 1,556,493 Intangible assets [note 4] 4,919,866 4,899,813 32,536,372 26,213,242 ___________________________________________ LIABILITIES AND SHAREHOLDERS' EQUITY Current Accounts payable and accrued liabilities 623,220 818,396 Due to directors [note 5] 4,760 99,831 Deferred revenue - current portion [note 6] 316,540 316,540 Current portion of capital lease obligations 22,921 25,629 Total current liabilities 967,441 1,260,396 Deferred revenue [note 6] 764,972 844,107 Capital lease obligations 47,788 50,270 Debenture [note 7] 6,818,744 - Total liabilities 8,598,945 2,154,773 Commitments [note 8 ] Shareholders' equity Share capital [notes 9[b] and 9[c]] 56,836,686 55,161,562 Contributed surplus [note 9[e]] 4,997,078 2,523,216 Deficit (37,896,337) (33,626,309) Total shareholders' equity 23,937,427 24,058,469 32,536,372 26,213,242 ___________________________________________ See Sedar for accompanying notes
International Wex Technologies Inc. CONSOLIDATED
STATEMENTS OF (Expressed in Canadian Dollars) Three Months Ended June 30, June 30, 2004 2003 $ $_____ UNDAUDITED [Restated - See note 6] Revenue Product sales [notes 10 and 11] 136,199 73,498 License fees [notes 10 and 11] 79,135 79,135 215,334 152,633 Cost of goods sold - product sales 84,728 62,331 130,606 90,302 Expenses Research and development [notes 9[e], 5] 1,923,581 471,469 General and administrative [notes 9[e], 5] 2,021,845 405,202 Amortization 196,005 105,072 4,141,431 981,743 Operating loss (4,010,825) (891,441) Other Interest and sundry income 63,285 12,176 Foreign exchange loss (322,488) (53,448) (259,203) (41,272) Loss for the period (4,270,028) (932,713) Deficit, beginning of period (33,626,309) (25,884,499) Deficit, end of period (37,896,337) (26,817,212) ___________________________________________ Basic and diluted loss per share [note 9[g]] (0.13) (0.04) ___________________________________________ Weighted average number of
common shares ___________________________________________ See Sedar for accompanying notes
SHAREHOLDERS LETTER TAKEN FROM THE 2004 ANNUAL REPORT
Dear Fellow Shareholders, This past fiscal year ending March 31, 2004 , was an important year for WEX and our shareholders. With our financial achievements, development progress with our European licensing partner, and the early clinical success of Tectin™, we are well positioned to build our company into a fully-integrated pharmaceutical company specializing in medicines for the treatment of pain, addiction withdrawal, and anaesthesia. The following are forward-looking statements containing hopes and aspirations that, although achievable, are beyond management's control; therefore, timelines are indicators rather than definitive markers. I would like to share with you my view of our progress and corporate developments. First and foremost is to recognize and thank you for your strong support! We raised almost $24,000,000 (CDN) through new equity issues and by the exercising of warrants and options. This is the first time the Company has raised such a substantial amount of money. This sum and the resulting budget allowed us to leave the TSX Venture Exchange and progress to a senior listing on the Toronto Stock Exchange (TSX). A strong product potential is of prime importance and a major milestone was attained when the Company announced the interim analysis showing a 68% clinically meaningful response for its Phase IIa clinical trial for assessing the efficacy and safety of Tetrodotoxin (Tectin™) in cancer patients with medically refractory pain. Prompted and encouraged by the clinical investigators, an immediate application for a double-blind placebo-controlled pivotal clinical trial (Phase IIb/III) was submitted to Health Canada . This was approved during January 2004. After comprehensive discussion with our global development consultants an open label long term study was submitted and a No Objection Letter ("NOL") was received from Health Canada on April 8, 2004 . This study now has 15 of the 23 qualified and approved clinical sites fully operational, including research ethics board approval. We are very proud that these sites literally cross Canada from coast to coast - Newfoundland to British Columbia! Our Company's subsidiary in China Nanning Maple Leaf Pharmaceuticals Co. Ltd ("NMLP") has completed an expansion of its research floor, including its pharmacology and analytical laboratories, placing it under a new research umbrella called Maple Leaf BioPharma Research Institute. Subsequent to our fiscal year end, we have completed our facility upgrade and hired additional seven scientific professional staff with advanced degrees that will further strengthen the dedicated team in NMLP. Besides supporting Tectin™'s ongoing clinical trials in Canada , NMLP has been expanding its research and development of novel compounds from natural toxins. Thus, its research capacity leads into broadening the scope of the lead product and expanding the long term drug pipeline. Many of you have asked about the status of Tetrodin™, our opioid drug withdrawal treatment program. We received from Health Canada in early 2002, a NOL for a Phase II clinical trial. At that time, Management felt that due to limited financial resources, it would be prudent to concentrate on Tectin™, which has the greatest opportunity to bring our first product to market. We are now in a position to update the Tetrodin™ protocol for the opioid withdrawal treatment Phase IIa trial, capitalizing on the clinical experience accumulated over the past two years with Tectin™. We intend to resubmit to Health Canada an amended protocol and plan a clinical trial in the last quarter of 2004. This is an exciting time for the Company as we look forward to the implementation of our global clinical development strategy to bring our products to market. Sincerely yours, " Frank Shum " President and CEO
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